FP’s Jack Mintz: Rethink retirement

OAS: Rethink retirement

The recent kerfuffle over Old Age Security costs have raised the angst that seniors’ benefits of up to $540 per month may be cut. Older Canadians should take a deep breath. Any changes to OAS will not affect current or soon-to-be retirees. In fact, federal budgets won’t be affected for years to come.

Canada’s pension is financially sustainable, a conclusion reached by the research I directed in 2009 for federal-provincial-territorial ministers of finance. But bigger issues are at play, as pointed out by the Prime Minister in his National Post interview last Saturday. The whole package of elderly support measures will be a significant drain on public finances in the future. We should examine the state’s role in supporting retirees who are now living much longer.

In the past, federal governments enhanced elderly benefits without taking sufficient care to examine the economic effects especially on labour markets. When OAS was introduced in 1952, retirement eligibility was 70 years of age while the average life expectancy was 68. Many would have passed away before receiving OAS.

During the years 1965-69, the eligibility age was moved down to 65, even though life expectancy was increasing. Now, with life expectancy above 80, most Canadians qualify for OAS for a very long time after 65. Other OAS changes included indexation of benefits (1973), spousal allowance (1975) and the end of universality for high-income seniors (1989). The OAS is clawed back at the rate of 15¢ for every dollar when individual income is above a threshold (for 2012, $69,562). It is fully clawed back when income reaches $112,772. Read more

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